Properly Manage Internal Expectations

Almost every sales organization and every seller operates under some pressure associated with quantifying and then making their sales numbers. The instincts that cause this are positive – the desire to succeed by meeting or exceeding quota, or perhaps to be seen as a top performer within the sales organization.

There are three related manifestations of this pressure that negatively impact the seller’s ability to deal with complex buy cycles.

  • We may raise expectations of success with internal management on deals where some of the fundamentals are missing or will take more time to develop. Such expectations can be made through forecasting in the CRM system or by what sales reps promise to their managers. Regardless of how this occurs, not taking reality into account affects the seller’s credibility and results.
  • We rush, trying to speed up the process. If the deal is not moving at the pace we desire (or which is imposed from above), this leads to mistakes and a loss of credibility internally or externally. In either event, that loss of credibility will further prolong the sales cycle or result in a lost opportunity.
  • We make unprincipled concessions in an attempt to get the prospect to act faster. As I explain in an earlier article, unprincipled concessions are “giveaways” not tied to a credible business rationale. Our research shows that this simple negotiation mistake costs businesses between 9 and 18% of gross revenue and significant profit. This is a much too high a price to pay in any sales scenario, especially when it doesn’t contribute to revenue.

To overcome the negative impact of these manifestations, I suggest you deal with each in a conscious way, in order to eliminate or reduce the mistakes and frustration caused by internal pressure. Very few individuals operate more effectively while under pressure. Prospects can sense it, and managers can sense it, and neither responds well to the type of selling environment caused by pressure.

One of the often unspoken issues is that the buying cycle can be vastly different from the sales cycle. Sales management can choose to dictate a certain sales cycle; say four months. However, while this sounds ok, the buyer may have a far different perspective on the timing of the deal. This is a good example of the quote, often attributed to John Lennon, “Life is what happens to you while you are busy making other plans.”

A few years ago, a friend was under some pressure to get a strategic contract done for his company. His executive called for status updates daily (sometime more often). He had a contract draft ready for the customer that at least one person other than him would normally review (two sets of eyes before something important goes to a customer is a good policy).

However, he felt he could not afford the couple of hours that the review would take. The contract had a critical typo in it that caused an internal escalation within the customer. While the deal was done, it took a week longer as a result. As mentioned above, the motivation for going against standard operating procedure was sound: the desire to make the sale happen on schedule.  However, in hindsight, the cost of the extra week was not worth the potential few hours saved.

Setting honest expectations and describing key dependencies and timing is always good practice, though it may not be what the boss wants to hear. This does not mean making excuses – rather it means being factual and explaining what needs to happen and what you are doing to facilitate an optimal outcome. This may be a bit painful in the short-term, where pressure to meet this quarter’s number is strongest – but it will definitely pay off over time, in terms of streamlined, less-painful and more profitable sales.

Negotiation Examples: How Avoiding Unprincipled Concessions Kept the Customer’s Respect (And Won More Revenue)

 

When competition starts putting the pressure on you, it’s natural to look at price-cutting as the primary way to keep the business. But in the long run, this is a mistaken impulse, unless accompanied by a sound business rationale such as a reduction in scope, change in terms or outcome from the deal. One of our engagements with a client that served a European industrial (the customer) with technology solutions definitely illustrated the value of avoiding such “unprincipled concessions!”

Unprincipled concessions are “giveaways” not tied to a credible business rationale. Our research shows that this simple business negotiation mistake costs companies between 9 and 18% of gross revenue and significant profit. (See our infographic on the topic for a more detailed discussion of this vital principle and how it can be applied.) Read more

Unprincipled Concessions Cost You Money at the Negotiating Table

Spot Them, Avoid Them and Close Faster

Unprincipled concessions are concessions not tied to a credible business rationale. Years of research show us that this simple business negotiation mistake costs companies between 9 and 18% of their gross operating revenue.

Principled Concessions Infographic

Read more

Six Principles Every International Negotiator Must Know: Concessions Easily Given Appear of Little Value

This is the seventh post in a series entitled: The Principles of International Negotiation: Finding Universal Value in a Complex World

It’s a worldwide phenomenon: You’re on vacation in a foreign country and decide to buy a souvenir. You know you shouldn’t pay the price they’re asking, so you make a lower offer on that “locally produced” carving. The vendor takes it. As your purchase is being wrapped, you’re thinking, “That was too easy. I could have bought it for less.”

We’re not trying to teach you to deprive starving artists of their living. But whenever someone asks for and easily gets a concession, Read more

Principled Concessions™ – The short version

In our workshops, we teach the concept of a “Principled Concession™”.  Many people hear this and confuse it with the related but different concept of trading concessions in a negotiation.  They think of common examples like these:

  • “If you buy 2, I can discount the second one by 50%.”
  • “If we reduce the scope by providing service 12×7 instead of 24×7, we can lower the price by 20%.”
  • “We can finance your total $100M payment for this project, at a cost to you of $1M.”

These “offers” follow the least-acceptable form of changing your position.  It is a more acceptable form than this one:

  • “I’ve sharpened my pencil, and I can offer you an additional 12% off the price.”

It is easy to see that the first three are preferable to the last one.  The 12% price reduction in the last example implicitly contains a message that your profit margin is high enough to offer a discount.  The buyer is now challenged to take that information, and try to find out how much margin, through extended negotiating.  Instead of the goal which the offer is usually intended to achieve (faster closing), it actually creates buyer uncertainty, loss of confidence, and delay.

Let’s reframe the first three in the form of Principled Concessions™:

  • “If you buy 2, I can discount the second one by 50% – and you’ll be able to use both at the same time when needed to perform (whatever desired outcome you bought them for).”
  • “If we reduce the scope by providing service 12×7 instead of 24×7, we can lower the price by 20%.  However, your mission-critical revenue-collection application will take longer to restore during the unsupported hours, and your revenue could be impacted by $25,000 for each hour of delay.”
  • “We can finance your total $100M payment for this project, at a cost to you of $1M.  This will allow the project benefit stream (in $) to pay for the continuing costs, and you will avoid significant out-of-pocket costs, thereby freeing up that money for other investments.”

In each of these cases, we are describing the exchange in terms of outcomes to each side.  For the seller, this is money.  The buyer gets simultaneous use (for whatever purpose), risks losing revenue, or will free up funding for other projects.  In each case, the outcome description provides a business basis for the concession, and allows the buyer to make the decision on the basis of business value.  In the real world, the outcome descriptions would be even more robust, but these examples convey the intent.

So here is the formal definition of a Principled Concession™: A concession given with a specific connection to business value.  The alternative form is this: A concession expressed as an exchange of outcomes.   (td)